EU construction to slow, remain best end-use sector

The slowdown in EU construction activity will become more pronounced during 2020, but the construction industry will continue to outperform other steel-using sectors, according to European steelmakers association Eurofer. EU construction output is forecast to rise 3.5% in 2019 and 1.2% in 2020.

The residential construction market is expected to remain relatively buoyant as in several countries demand continues to outweigh supply. In Spain, for example, housing still has room for growth, having not yet recovered from losses during the housing market collapse of 2009. Improving EU real wages and the low cost of mortgage financing will continue to stimulate housing demand. In much of Western Europe, however, the residential construction cycle has already peaked.

The private non-residential construction sector has been growing but slower than residential and civil engineering, hampered by subdued business confidence and corporate investment. “The downturn in the manufacturing industry in Europe will most likely contribute to delay investment decisions, as well as the pronounced slowdown in EU exports which will impact export-related business investment,” Eurofer says in a report seen by Kallanish.

“In contrast, the role of civil engineering as a growth engine for the construction sector is expected to strengthen over the forecast period,” thanks to improving infrastructure investment, Eurofer observes.

EU construction activity rose 4.3% on-year in the second quarter versus “…spectacular” growth of 5.9% in Q1, Eurofer says. This was the tenth quarter in succession of robust expansion and meant construction remained the best performing key steel using sector.

Construction activity in Q2 grew in all reporting countries except Slovakia, where it fell for a consecutive quarter. Output growth was particularly pronounced in Austria, Croatia, Hungary, the Netherlands, Poland and Spain.

In line with actual construction production volumes, gross fixed investment in construction in Q2 grew in real terms by 3.1% on-year, compared with 4.8% in Q1. This was a -0.2% drop on-quarter, “…most probably a first sign of the cooling-off of the sector further to the rather strong cycle of the previous quarters,” Eurofer observes.